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STATE BOARD OF EXAMINERS OF PLUMBING,HEATING, AND FIRE SPRINKLER CONTRACTORS

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSBoard Members

BOARD MEMBERS (2017)

Jeffrey R. Dunn, Chairman

William H. Sullivan, III, Vice Chairman

Robert J. Owens, Secretary/Treasurer

William H. Eubanks

John N. Royal

D. Hunter Edwards, Jr.

Stuart F. Schwartz

EXECUTIVE DIRECTOR

Dale L. Dawson

LEGAL COUNSEL

John N. Fountain

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSTable of Contents

Page No.

Management’s Discussion and Analysis ..……….……………………………………… 1

Independent Auditor’s Report …………………………………………………………… 3

Financial Statements

Statements of Net Position …………………………………………………………… 5

Statements of Revenues, Expenses, and Changes in Net Position …………………… 6

Statements of Cash Flows …………………………………………………………… 7

Notes to Financial Statements ……………………………………………………… 8

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSManagement's Discussion and AnalysisFor the Fiscal Year Ended December 31, 2017

Introduction

Financial Highlights

Overview of the Financial Statements

Basic Financial Statements

The basic financial statements of the Board report information about the Board using accountingmethods similar to those used by private sector companies. These statements offer short and long-term financial information about the activities of the Board.

The following is a discussion and analysis of the State Board of Examiners of Plumbing, Heating, andFire Sprinkler Contractors’ (the “Board”) financial statements for the year ended December 31, 2017.The accompanying financial statements and footnotes comprise our complete set of financialinformation. The Management’s Discussion and Analysis identifies significant transactions that havefinancial impact and highlights favorable and unfavorable trends. Comparative data for the currentyear and the previous two years are presented in the analysis.

During 2017, the operating revenues of the Board increased by $66,793, or 3.4%, an insignificantamount of the total budget of $1,977,000.

During 2017, the non-operating revenues of the Board increased by $3,057, or 27.8%. This increasewas primarily due to an increase in unrealized gains on investments, partially offset by a decrease innet investment income.

During 2017, the operating expenses of the Board increased by $55,450 or 2.9%. This increase wasprimarily due to increases in salaries and benefits, examination costs, and legal fees, partially offset bydecreases in printing costs and board member expenses.

This discussion and analysis is an introduction to the Board’s basic financial statements, which arecomprised of the following components: 1) Statements of Net Position, 2) Statements of Revenues,Expenses and Changes in Net Position, 3) Statements of Cash Flows, and 4) Notes to FinancialStatements. These financial statements are prepared in accordance with accounting principlesgenerally accepted in the United States of America as prescribed by the Governmental AccountingStandards Board (GASB).

The Statements of Net Position present the current and noncurrent portions of assets and liabilitiesseparately.

The Statements of Revenues, Expenses, and Changes in Net Position present information on how theBoard’s net position changed as a result of the year's operations.

The Statements of Cash Flows present information on how the Board’s cash changed as a result of theyear's activity.

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSManagement's Discussion and AnalysisFor the Fiscal Year Ended December 31, 2017

2017 2016 2015

Current assets 3,008,888$ 3,074,095$ 2,908,282$ Capital assets 1,535,879 1,473,577 1,523,107 Noncurrent assets 171,620 133,655 101,490

Total assets 4,716,387 4,681,327 4,532,879

Current liabilities 1,499,698 1,546,816 1,466,146 Noncurrent liabilities 72,368 57,126 41,884

Total liabilities 1,572,066 1,603,942 1,508,030

Investment in capital assets 1,535,879 1,473,577 1,523,107 Unrestricted 1,608,442 1,603,808 1,501,742

Total net position 3,144,321$ 3,077,385$ 3,024,849$

Operating revenues 2,041,424$ 1,974,631$ 2,003,833$ Operating expenses (1,988,547) (1,933,097) (1,874,947) Operating income 52,877 41,534 128,886 Non-operating revenues 14,059 11,002 12,929

Changes in net position 66,936$ 52,536$ 141,815$

Events Affecting Future Operations

Contacting the Board's Management

The Board implemented a Post-Employment Health Benefits Plan effective January 1, 2014, whichresulted in an estimated annual required contribution of approximately $11,000 for the years endedDecember 31, 2017 and 2016. At December 31, 2017, the actuarial accrued liability of approximately$68,000 was well below the actuarial asset value of $171,670. The Board made contributions to fundthe plan of $75,000 in 2014, and $25,000 in 2015, 2016, and 2017. The Board will obtain a newactuarial study which will be effective December 31, 2017, and will consider the actuarial valuationwhen making future contributions.

This financial report is designed to provide a general overview of the Board’s finances and todemonstrate the Board’s accountability for the money it receives. If you have any questions about thisreport or need additional information, contact: State Board of Examiners of Plumbing, Heating andFire Sprinkler Contractors, 1109 Dresser Court, Raleigh, NC 27609.

The following presents condensed financial information on the operations of the Board as ofDecember 31, and its operating and non-operating revenues and expenses for the years then ended:

Management is in the process of upgrading the licensee software used to manage licensee status andpayments. The total contract price of $31,500 includes required costs of $18,000 for conversion andinstallation and optional items totaling $13,500. Monthly licensing fees of $2,000 are subject tocancellation upon a 30-day written notice. The new licensee software will replace the current software license agreement which included maintenance fees of approximately $36,500 in 2017.

Independent Auditor's Report

Members of the BoardState Board of Examiners of Plumbing, Heating, and Fire Sprinkler ContractorsRaleigh, North Carolina

Report on the Financial Statements

We have audited the accompanying financial statements of the State Board of Examiners of Plumbing,Heating, and Fire Sprinkler Contractors (the "Board"), which comprise the statements of net position as ofDecember 31, 2017 and 2016, and the related statements of revenues, expenses, and changes in netposition, and cash flows for the years then ended, and the related notes to the basic financial statements,which collectively comprise the Board's basic financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these basic financial statements inaccordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these basic financial statements based on our audits. Weconducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audits to obtain reasonable assuranceabout whether the basic financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thebasic financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the basic financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the Board’spreparation and fair presentation of the basic financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the Board’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluating the overall presentation of the basicfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

Opinion

In our opinion, the basic financial statements referred to above present fairly, in all material respects, thefinancial position of the State Board of Examiners of Plumbing, Heating, and Fire Sprinkler Contractors asof December 31, 2017 and 2016, and its changes in financial position and cash flows for the years thenended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1, these financial statements are presented only for the State Board of Examiners ofPlumbing, Heating, and Fire Sprinkler Contractors and do not purport to and do not present fairly thefinancial position of the State of North Carolina as of December 31, 2017 and 2016, nor the changes in itsfinancial position and its cash flows thereof for the years then ended in conformity with accountingprinciples generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’sDiscussion and Analysis, on pages 1 – 2, be presented to supplement the basic financial statements. Suchinformation, although not a part of the basic financial statements, is required by the GovernmentalAccounting Standards Board, who considers it to be an essential part of financial reporting for placing thebasic financial statements in an appropriate operational, economic, or historical context. We have appliedcertain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries of managementabout the methods of preparing the information and comparing the information for consistency withmanagement’s responses to our inquiries, the basic financial statements, and other knowledge we obtainedduring our audit of the basic financial statements. We do not express an opinion or provide any assuranceon the information because the limited procedures do not provide us with sufficient evidence to express anopinion or provide any assurance.

Raleigh, North CarolinaApril 13, 2018

See Notes to Financial Statements Page 5

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSStatements of Net PositionDecember 31, 2017 and 2016

2017 2016ASSETS:

Current assets:Cash and cash equivalents 2,970,111$ 3,058,523$ Prepaid expenses 9,430 13,560Escrowed legal fees 29,347 - Other assets - 2,012

Total current assets 3,008,888 3,074,095

Capital assets - net of depreciation:Land and building 1,384,346 1,348,729Furniture and office equipment 73,932 23,397Vehicles 77,601 101,451

Total capital assets - net of depreciation 1,535,879 1,473,577

Noncurrent assets: Investments - designated 171,620 133,655

Total assets 4,716,387 4,681,327

LIABILITIES:

Current liabilities:Accounts payable 77,430 86,318Compensated absences - current portion 18,800 16,000Unearned revenue 1,403,468 1,444,498

Total current liabilities 1,499,698 1,546,816

Noncurrent liabilities:Compensated absences - long-term portion 28,200 24,000 Other postemployment benefits obligation 44,168 33,126

Total noncurrent liabilities 72,368 57,126

Total liabilities 1,572,066 1,603,942

NET POSITION:

Investment in capital assets 1,535,879 1,473,577 Unrestricted 1,608,442 1,603,808

Total net position 3,144,321$ 3,077,385$


STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSStatements of Revenues, Expenses, and Changes in Net PositionYears Ended December 31, 2017 and 2016

2017 2016Operating revenues:

License fees 1,802,931$ 1,779,417$ Examination and application fees 145,405 126,450Late processing fees 15,100 16,351Other operating revenues 77,988 52,413

Total operating revenues 2,041,424 1,974,631

Operating expenses:Salaries and wages 810,322 749,078Payroll taxes 59,399 54,413Retirement contributions 65,307 60,333Employee insurance 124,601 114,445Other postemployment benefits contribution 11,042 11,042Board members' expenses 40,069 51,164Travel and lodging 68,026 67,427Contracted temporary services 4,042 8,043Telephone 12,123 16,338Depreciation 62,766 64,032Computer support 46,528 44,903Building maintenance and utilities 21,533 22,377Examination costs 96,746 86,255Hearing expenses 29,655 31,982Office and computer expenses 61,419 69,895Printing 27,939 38,639Postage and shipping 19,767 21,318Insurance 38,763 40,593Dues and publications 2,400 2,975Legal, audit, and other professional fees 378,018 363,344Continuing education expenses 8,082 14,501

Total operating expenses 1,988,547 1,933,097

Operating income 52,877 41,534

Non-operating revenues:Net investment income 3,906 7,268Net realized and unrealized gain on investments 10,153 3,734

Total non-operating revenues 14,059 11,002

Changes in net position 66,936 52,536

Net position - beginning of year 3,077,385 3,024,849

Net position - end of year 3,144,321$ 3,077,385$


STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSStatements of Cash FlowsYears Ended December 31, 2017 and 2016

2017 2016Cash flows from operating activities:

Cash received from fees 1,922,406$ 1,955,794$ Cash received from other operating revenues 77,988 52,413 Cash payments to employees for services (1,050,617) (973,281) Cash payments to suppliers of goods and services (711,636) (673,189) Cash payments for other operating expenses (177,579) (168,049)

Net cash provided by operating activities 60,562 193,688

Cash flows from investing activities: Purchase of investments (25,000) (28,335) Sale of investments - 3,335

Net investment income 3,906 7,268 Investment income reinvested (2,812) (3,431)

Net cash used in investing activities (23,906) (21,163)

Cash flows from capital and financing activities:Acquisition of capital assets (125,068) (14,502)

Net cash used in capital and financing activities (125,068) (14,502)

Net increase (decrease) in cash and cash equivalents (88,412) 158,023

Cash and cash equivalents - beginning of year 3,058,523 2,900,500

Cash and cash equivalents - end of year 2,970,111$ 3,058,523$

Reconciliation of operating income to net cash provided by operating activities:

Operating income 52,877$ 41,534$ Adjustments to reconcile operating income to net cash provided by operating activities:

Depreciation 62,766 64,032 Changes in assets and liabilities:

Prepaid expenses 4,130 (5,778) Escrowed legal fees (29,347) - Other assets 2,012 (2,012) Accounts payable (8,888) 44,294 Unearned revenues (41,030) 33,576 Compensated absences 7,000 7,000 Other postemployment benefits obligation 11,042 11,042

Total adjustments 7,685 152,154

Net cash provided by operating activities 60,562$ 193,688$

STATE BOARD OF EXAMINERS OF PLUMBING, HEATING, ANDFIRE SPRINKLER CONTRACTORSNotes to Financial Statements

NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

Description of Organization

Financial Reporting Entity

Basis of Presentation

Basis of Accounting

Proprietary funds are used to account for operations that are financed and operated in a manner similarto private business enterprises where the intent of the governing body is that the cost of providinggoods or services to the general public on a continuing basis be financed or recovered primarilythrough user charges.

The basic financial statements of the Board have been prepared using the economic resourcemeasurement focus and the accrual basis of accounting. Under the accrual basis, revenues arerecognized when earned, and expenses are recognized when a liability has been incurred, regardless ofthe timing of the cash flows.

The State Board of Examiners of Plumbing, Heating, and Fire Sprinkler Contractors (the “Board”) isan independent State agency. It is an occupational licensing board and is authorized by Chapter 87 ofthe North Carolina General Statutes. The Board is composed of seven members who are appointed bythe Governor.

The Board is established to protect the public health, safety and welfare of the citizens of NorthCarolina by maintaining minimum standards for services provided by plumbing, heating and firesprinkler contractors.

The Board’s operations are financed with self-generated revenues from fees charged to examinees andlicensees.

The accompanying basic financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America as prescribed by GovernmentalAccounting Standards Board (“GASB”).

The concept underlying the definition of the financial reporting entity is that elected officials areaccountable to their constituents for their actions. As required by accounting principles generallyaccepted in the United States of America, the financial reporting entity includes both the primarygovernment and all of its component units. An organization other than a primary government servesas a nucleus for a reporting entity when it issues separate financial statements. The accompanyingfinancial statements present all funds and activities for which the Board is responsible.

For financial reporting purposes, the Board is a nonmajor enterprise fund of the primary governmentof the State of North Carolina and may be reported as such in the State's Comprehensive AnnualFinancial Report (CAFR). These financial statements for the Board are separate and apart from thoseof the State of North Carolina and do not present the financial position of the State nor changes in theState's financial position and cash flows.

The accompanying financial statements present all funds and activities for which the Board isresponsible.


NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Accounting (Continued)

Cash and Cash Equivalents

Investments

Capital Assets

Building and improvements 7-40 yearsFurniture, office equipment, and software 3-10 yearsVehicles 8 years

Unearned Revenue

When an asset is disposed of, the cost of the asset and the related accumulated depreciation areremoved from the books. Any gain or loss on disposition is reflected in non-operating revenue orexpense for the period.

Nonoperating revenues and expenses include activities that have characteristics of nonexchangetransactions and consist primarily of investment activities.

Investments consist of equities and mutual funds and are reported at fair value. Fair values are basedon readily available market quotes.

The Board’s fees are assessed and collected on a calendar year basis, which corresponds with theBoard’s accounting period. Licenses are renewed for a period of one calendar year. License renewalfees received in the latter part of the fiscal year and related to the subsequent year's renewal period arereported as unearned revenue and recognized as revenue over the one-year period to which they relate.

The Board classifies its revenues as operating or non-operating in the accompanying Statements ofRevenues, Expenses, and Changes in Net Position. Operating revenues and expenses generally resultfrom providing services that are necessary to the Board’s principal ongoing operations. Operatingrevenues include activities that have characteristics of exchange transactions and consist primarily ofexamination and license fees. Operating expenses are all expense transactions incurred other thanthose related to capital and non-capital financing or investing activities as defined by GASB StatementNo. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and GovernmentalEntities that Use Proprietary Fund Accounting.

This classification includes cash on deposit and money market accounts with financial institutions.For purposes of the statements of cash flows, the Board considers all investments with an originalmaturity of three months or less when purchased as cash equivalents.

Capital assets are recorded at cost at the date of acquisition. The Board capitalizes assets that have acost of $1,000 or greater at the date of acquisition and an expected useful life in excess of two years.Depreciation is computed using the straight-line method over the following useful lives:


NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Compensated Absences

Net Position

Use of Estimates

Board employees may accumulate up to thirty days earned vacation which is fully vested whenearned. The Board approved a policy in 2013 which was amended in 2017 whereby employees with aminimum of 80 banked hours, who have taken a minimum of 40 hours of vacation during the previoustwelve calendar months prior to December 1 of each year, may participate in the Board’s vacationleave buy-back program. The employee can sell back a maximum of 80 hours of vacation timeannually, but may not fall below 60 hours of accrued vacation time banked. The Board paid $15,663and $10,569 to employees under the vacation buy-back program for the years ended December 31,2017 and 2016, respectively.

Investment in Capital Assets - This represents the Board's total investment in capital assets net ofaccumulated depreciation.

The Board's net position is classified as follows:

The preparation of financial statements in conformity with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affectcertain reported amounts of assets and liabilities at the date of the financial statements and thereported amounts of revenue and expenses during the reporting period. Accordingly, actual resultscould differ from those estimates, resulting in adjustments in future periods.

The Board’s sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leavecredits at the rate of 8 hours per month for full-time permanent employees. In 2013, the Boardapproved a policy whereby employees with a minimum of 600 hours of accumulated sick leave mayparticipate in the Board’s sick leave buy-back program. The employee can sell back a maximum of 80 hours of sick time during a calendar year, but must maintain a minimum of 520 hours in sick leave.The Board paid $9,709 and $9,426 to employees under the sick leave buy-back program for the yearsended December 31, 2017 and 2016, respectively. Unused sick leave is not paid upon termination ofemployment; therefore, no accrual for sick leave has been made.

Employees who are eligible and elect to participate in the vacation and sick leave buy-back programsmust notify the Board no later than November 15 of each year with the payment made to the employeeon December 15.

Unrestricted - This represents assets with no externally imposed stipulations as to use or purpose.Unrestricted net assets can be employed for any purpose designated by the governing board, asdistinguished from funds restricted externally for specific purposes.


NOTE 2 - DEPOSITS

NOTE 3 - INVESTMENTS

The Board is subject to the following risks:

•

•

• Time deposits of financial institutions with a physical presence in North Carolina. Time deposit accounts insured by the FDIC are favored over those insured by other entities.

The bank deposits included in the investments below are insured by the FDIC up to $250,000. Theequities and mutual funds are insured by the Securities Investor Protection Corporation (SIPC) up to$500,000. The SIPC is a nonprofit member corporation funded by its member securities broker-dealers. The SPIC insures against the loss or theft of securities as well as the failure or insolvency ofthe brokerage firm.

Interest Rate Risk: Interest rate risk is the risk the Board may face should interest rate variancesaffect the fair value of investments.

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfillits obligations. The Board manages credit risk by diversifying its investment portfolio. Investmentsare limited to:

The Board's deposits include cash and money market accounts on deposit with financial institutions.

Custodial credit risk is the risk that in the event of a bank failure, the Board's deposits may not bereturned to it. The Board's deposits are insured by the Federal Deposit Insurance Corporation (FDIC)up to $250,000. Deposits exceeding FDIC limits are covered by mortgage-backed securities held bythe bank.

There are no legal limitations on the types of investments by the Board. The Board has adoptedformal investment policies to establish investment objectives, standards of prudence, eligibleinvestments, and safekeeping and custodial procedures necessary for the prudent management of theprivate funds maintained by the Board.

During 2014, the Board created a designated fund to be used for funding the post-employmentbenefits, described in Note 8, to be segregated from other funds of the Board and not to be used forany other purpose. The Board's investment policy stipulates the funds may be invested by the Boardin any type investment used by the State Retirement System for investment of its retirement funds, butexcluding derivatives, hedge funds, options, real estate or the equivalent. The funds are monitored bythe Board's Chairman to ensure dividends are being earned and, if necessary, the Board has the optionto change the investment mix upon Board approval. An initial amount of $75,000 was invested in thefund in 2014 with $25,000 added to the fund annually beginning in 2015.

Obligations of the State of North Carolina.

Obligations of the United States or obligations fully guaranteed both as to principal and interestby the United States.


Fair UnrealizedDecember 31, 2017 Cost Value Gain (Loss)Money market funds $ 40,259 $ 40,259 $ - Equities 112,346 127,934 15,588 Mutual funds 4,727 3,427 (1,300)

Total investments $ 157,332 $ 171,620 $ 14,288

Fair UnrealizedDecember 31, 2016 Cost Value Gain (Loss)Money market funds $ 25,005 $ 25,005 $ - Equities 99,787 104,822 5,035 Mutual funds 4,727 3,828 (899)

Total investments $ 129,519 $ 133,655 $ 4,136

December 31, 2017 Level 1 Level 2 Level 3 TotalEquities $ 127,934 -$ -$ $ 127,934 Mutual funds 3,427 - - 3,427

Total investments 131,361$ -$ -$ 131,361$

December 31, 2016 Level 1 Level 2 Level 3 TotalEquities $ 104,822 -$ -$ 104,822 Mutual funds 3,828 - - 3,828

Total investments 108,650$ -$ -$ 108,650$

NOTE 3 - INVESTMENTS (Continued)

Fair value is defined as the price that would be received for an asset or the exit price that would bepaid to transfer a liability in an orderly transaction between market participants on the measurementdate. The Board utilizes market data or assumptions that market participants would use in pricing theasset or liability.

A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. Thesetiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2,defined as inputs other than quoted prices in active markets that are either directly or indirectlyobservable; and Level 3, defined as unobservable inputs about which little or no market data exists,therefore requiring an entity to develop its own assumptions. The asset’s fair value measurement levelwithin the fair value hierarchy is based on the lowest level of any input that is significant to the fairvalue measurement.

The following table sets forth by level, within the fair value hierarchy, the Board's assets at fair valueas of December 31, 2017 and 2016:

The following table presents the cost and fair value of investments by type and investments subject tointerest rate risk and credit risk at December 31, 2017 and 2016:


NOTE 4 - CAPITAL ASSETS

Cost Cost Accum. Net12/31/2016 Additions Retirements 12/31/2017 Depreciation Amount

Land 500,000$ -$ -$ 500,000$ -$ 500,000$ Building 1,186,373 63,714 - 1,250,087 365,741 884,346 Furniture/ equipment 419,496 61,354 32,785 448,065 374,133 73,932 Vehicles 190,800 - - 190,800 113,199 77,601

2,296,669$ 125,068$ 32,785$ 2,388,952$ 853,073$ 1,535,879$

Cost Cost Accum. Net12/31/2015 Additions Retirements 12/31/2016 Depreciation Amount

Land 500,000$ -$ -$ 500,000$ -$ 500,000$ Building 1,184,910 1,463 - 1,186,373 337,644 848,729 Furniture/ equipment 406,457 13,039 - 419,496 396,099 23,397 Vehicles 190,800 - - 190,800 89,349 101,451

2,282,167$ 14,502$ -$ 2,296,669$ 823,092$ 1,473,577$

NOTE 5 - COMPENSATED ABSENCES

Changes to accrued vacation are as follows:

2017 2016Beginning accrued compensated absences 40,000$ 33,000$ Vacation earned 51,671 46,714 Vacation used (44,671) (39,714) Ending accrued compensated absences 47,000$ 40,000$

NOTE 6 - OPERATING LEASE

The Board leases a postage machine under an operating lease which expires in March of 2018. Totalrent expense charged to operations under the lease agreement was approximately $4,429 and $3,700in 2017 and 2016, respectively. Future minimum lease payments required under the lease areapproximately $780.

Changes in capital assets for the years ended December 31, 2017 and 2016 are as follows:


NOTE 7 - RETIREMENT PLAN

NOTE 8 - POST-EMPLOYMENT BENEFITS

In 1997, the Board established a salary reduction, defined contribution retirement savings plan inaccordance with Internal Revenue Code Section 401(k). Participating employees must contribute atleast 6% of their compensation each year, up to IRS deferral limitations. Additionally, the Boardmakes discretionary contributions to the plan which amounted to 8.15% of employee compensation in2017 and 2016. During 2017, voluntary contributions by employees were $80,169 and the Board’scontribution was $65,307. During 2016, voluntary contributions by employees were $68,157 and theBoard’s contribution was $60,333. The employee’s contributions are 100% vested immediately, andthe Board’s matching contributions are 100% vested after 5 years of credited service.

The Board obtained an updated actuarial valuation of the Plan in February 2017, resulting in anactuarial accrued liability (AAL) of $68,309 at December 31, 2016, representing 10.1% of coveredpayroll, and an annual required contribution (ARC) beginning in 2014 of $11,042. The ARC consistsof normal cost plus assumed interest, and amortization of the AAL which is calculated assuming a 30-year open level annual amortization schedule. Covered payroll consists of twelve active employees.Based on the average age of the active employees, expected benefit payments will begin in the yearending December 31, 2028. A discount rate of 4.5% was used for the valuation, which represents theestimated long-term investment yield on the investments that are expected to be used to finance thepayment of benefits, with consideration given to the nature and mix of current and expectedinvestments. The actuarial valuation reflects a long term perspective and involves estimates of thereported amounts and assumptions about the probability of events far into the future. Actuariallydetermined amounts are subject to continual revision as actual results are compared to pastexpectations and new estimates are made about the future.

Effective January 1, 2014, the Board established the State Board of Examiners of Plumbing, Heating& Fire Sprinkler Contractors Retiree Health Care Arrangement (the "Plan"), which is considered another post-employment benefit plan ("OPEB") and is accounted for under the provisions ofGovernmental Accounting Standards Board Statement 45 ("GASB 45") Accounting and FinancialReporting by Employers for Postemployment Benefits Other Than Pensions. The plan is a self-administered, single-employer plan. Significant terms of the Plan are as follows:

Employees retiring on or after age 60 and having completed 20 years but less than 25 years of Boardservice shall be eligible to receive a defined contribution from the Board of $150 per month for healthcare costs. Employees retiring on or after age 60 and having completed 25 years but less than 30years of Board service shall be eligible to receive a defined contribution from the Board of $250 permonth for health care costs. Employees retiring after completion of 30 years of Board service at anyage shall be eligible to receive a defined contribution from the Board of $400 per month for healthcare costs. Every five years the Board’s Executive Committee will perform a market comparison and,at the discretion of the Board's Executive Committee, may increase the amount of the defineddistribution to mimic the increase in the economic environment of the previous five year period, but inno case may the Board decrease the defined contribution.


NOTE 8 - POST-EMPLOYMENT BENEFITS (Continued)

NOTE 10 - RISK MANAGEMENT

The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors and omissions; injuries to employees; and natural disasters. Tort claims of Boardmembers up to $1,000,000 are self-insured by the State under the authority of the State Tort ClaimsAct. Additional coverage is provided to the Board under the State's Public Officers' and Employees'Liability Insurance contract with a private insurance company. The Board also protects itself fromexposures to loss through the purchase of commercial insurance, of which coverage includes Boardmembers, building and contents, commercial liability, workers compensation and employers' liability,and vehicle.

The Board designated funds which are held in a brokerage account to be used solely for the funding ofthe post employment benefits. These designated investments are described in Note 3.

NOTE 9 - COMMITMENTS

In January 2018, the Board entered into a contract for the installation and licensing of software, whichis used to manage licensee status and payments. The total contract price of $31,500 includes requiredcosts totaling $18,000 for basic conversion, installation and integration of the software and additionaloptional items totaling $13,500 related primarily to additional conversion and various online options.After installation, the monthly licensee fee will be $2,000, which may be cancelled at any time via a30-day written notice. The Board expects to convert to the new software license during 2018.

In addition to the post-employment health benefits, a retiring employee, at the time of 25 years ofservice, may chose to have the balance of their sick time distributed at the rate of $.30 for each $1 ofvalue in time accrued. The rate of pay for each hour is the average of the hourly rate of the retiringemployees’ pay during the last five years of employment.

In June 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 75Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, whichreplaces GASB 45, and outlines reporting by governments that provide OPEB to their employees andfor governments that finance OPEB for employees of other governments. The provisions in StatementNo. 75 are effective for fiscal years beginning after June 15, 2017. The OPEB expense for the fiscalyear ended December 31, 2017 will be determined pursuant to GASB 75 after the end of the 2017year based on an actuarial valuation. In the year that GASB 75 is first implemented, the Board will berequired to make a prior period adjustment to the statement of net position as of the beginning of theyear of implementation to remove the OPEB obligation determined under GASB 45 and add theOPEB liability determined under GASB 75. The Board has not yet received the actuarial valuation asof December 31, 2017 under GASB 75 and has not determined the effects the adoption of GASB 75will have on its financial statements.


NOTE 11 - CONTINGENCIES

NOTE 12 - SUBSEQUENT EVENTS

The audit was conducted in approximately 88 hours at a cost of $11,280.

The Board is involved in a number of disciplinary hearings throughout the year which arise in theordinary course of its operations. In the opinion of management of the Board, the results of suchactions during the year under audit do not materially affect the Board’s operations, changes infinancial position, or cash flows for the year herein ended.

Management of the Board evaluated subsequent events through April 13, 2018, which is the date thefinancial statements were available to be issued. They discovered no subsequent events that should bedisclosed.

During 2017, the Board was ordered to reimburse a licensee's legal expenses in the amount of $29,347which was paid into an escrow account with the Clerk of Court, and is presented on the accompanyingStatement of Net Position as escrowed legal fees. These fees have not been recognized as expense inthe current year as the Board is currently appealing this decision. As of the date the financialstatements were available to be issued, the case had not yet been resolved.

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